Woodhurst and Rubbens

[2016] FamCA 730

FAMILY COURT OF AUSTRALIA

WOODHURST & RUBBENS [2016] FamCA 730

FAMILY LAW – SPOUSAL MAINTENANCE – Where the wife’s financial need was not disputed – Question of the husband’ capacity to pay spousal maintenance – Where the wife proposes the husband could draw money from a company of which he is a shareholder – Where the husband proposes the parties live off existing income and their capital – Where the wife’s proposal could affect compliance with Division 7A of the Income Tax Assessment Act 1936 (Cth) – Where the husband has a significant amount of money held in trust of which he is the sole legal owner ­– Where the release of funds from the trust account – Ordered that the husband pay spousal maintenance of $500 per week – Ordered that $100,000 is released to each party from funds held on trust – Ordered that an injunction is imposed precluding further withdrawals from the trust account

Family Law Act 1975 (Cth), Pt VIII
Income Tax Assessment Act 1936 (Cth), Div 7A

APPLICANT: Ms Woodhurst

RESPONDENT: Mr Rubbens

FILE NUMBER: SYC 471 of 2016

DATE DELIVERED: 11 August 2016

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Austin J

HEARING DATE: 11 August 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Othen

SOLICITOR FOR THE APPLICANT: Rebekah Dorter Family Law

COUNSEL FOR THE RESPONDENT: Mr Campton SC

SOLICITOR FOR THE RESPONDENT: Mills Oakley Lawyers

Orders

1. Pending further order, the husband shall pay to the wife spousal maintenance of $500 a week on the following conditions:

(a)The first payment is due and payable within seven days hereof;

(b)Payments are to be made by direct deposit into the wife’s banking account held with the ANZ Bank, being BSB No … Account No ...

1. The parties shall forthwith do all acts and things necessary to authorise and instruct the wife’s solicitors to pay from the funds held by them on trust for the parties, by way of interim property settlement and/or spousal maintenance:

(a)    The sum of $100,000 to the wife; and

(b)    The sum of $100,000 to the husband.

1. Subject to compliance with Order 2, pending further order or unless otherwise agreed in writing between the parties, the parties are restrained from withdrawing any more of the funds held on trust for them by the wife’s solicitors.

1. Otherwise:

(a)The application in a case filed on 23 May 2016 is dismissed.

(b)The further amended response to an application in a case dated 9 August 2016 is dismissed.

(c)Any and all other outstanding applications for interim orders are dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Woodhurst & Rubbens has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 471 of 2016

Ms Woodhurst

Applicant

And

Mr Rubbens

Respondent

EX-TEMPORE

REASONS FOR JUDGMENT

1. These proceedings between the applicant wife and respondent husband under Part VIII of the Family Law Act 1975 (Cth) have been extant since January 2016, the parties having separated some time in early 2015. The dispute over the date of separation is immaterial for present purposes.

2. On 23 May 2016, the wife filed an Application in a Case seeking interim relief in numerous different forms. The only relief she now seeks is the husband’s payment to her of periodic spousal maintenance. In her Application in a Case she sought $9,083.33 per month (indexed annually), but today she orally amended the claim to $2,000 per week. 

3. The wife had no objection to the husband’s reliance upon a Further Amended Response to an Application in a Case, which he executed on 9 August 2016. I remain unsure as to whether it has yet been filed. The husband’s position was that some $700,000 held in a solicitor’s trust account should be released to the parties in designated portions, in which event he would then pay the wife spousal maintenance of $400 per week, but otherwise he should not have to pay her anything. The husband abandoned his ancillary claim for the wife to surrender to him a vehicle, which is in her possession pursuant to interim orders made on 23 May 2016 with his consent. 

4. The sole issue for determination then was spousal maintenance.

Evidence

1. To prosecute her claim, the wife relied upon:

   a)her Financial Statement filed on 23 May 2016; 

   b)her affidavit filed on 23 May 2016; 

   c)the 2016 Balance Sheet of B Pty Ltd trading as B Consulting (exhibit W1); 

   d)the 2016 profit and loss summary for the company (exhibit W2);  and

   e)the 2015 tax return for the company (exhibit W3). 

2. To defend his position, the husband relied upon:

   a)his Financial Statement sworn on 10 August 2016;  and

   b)his affidavit affirmed on 9 August 2016.

Discussion

1. It was uncontroversial that the wife’s financial need computed to $2,000 per week and that she was unable to derive income to support herself. 

2. The entire focus of the dispute was the husband’s capacity to pay spousal maintenance, either at all or up to the quantum sought by the wife. 

3. The husband is a director of B Pty Ltd and holds 80 per cent of the shares in the company. The other director, who is not a party to these proceedings, holds the other 20 per cent of the shares. The company conducts a business known as B Consulting and it employs the husband in that business. Historically, the husband’s gross annual income has been about $170,000. It is accepted his net income is about $120,000 per annum. In addition to his salary, over the last two financial years, the husband has borrowed money from the company to support the lifestyle hitherto enjoyed by the parties and their children.

4. It is an agreed fact the husband has, and will continue to, bear expenses related to the wife and children, which amount to about $98,000 per annum. The husband’s case is that, with such continuing expenditure, he cannot even support himself from the residue of his net income, let alone divert more of it to pay spousal maintenance. The wife’s proposed solution to the problem was for the husband to continue drawing money from the company, as he has historically done, to maintain her. She asserts he can draw the money either in the form of dividends or by enlargement of his loan account, which already stands at about $579,000 in debit. The wife contends that, by so doing, the husband can utilise the income stream generated by the company to support both him and her rather than force them to live off capital, which is the husband’s solution. 

5. Following separation, the parties sold a real property of which the husband was the sole legal proprietor. The net proceeds of sale, which apparently total about $694,000, rest in escrow in the wife’s solicitor’s trust account. The two most significant assets of the parties are those moneys and the value of the husband’s 80 per cent shareholding in B. There is no expert evidence about the value of the company, but it was common ground the husband earlier admitted in these proceedings its value approximates $1 million. Of course, that value must be taken to incorporate the asset in the form of the debt owed to the company by the husband, which I have said already is about $579,000.

6. The company, over the last two years, has made an annual gross profit of about $420,000 which, allowing for a tax rate of 30 per cent, reduces to an annual net profit figure of about $300,000. There is no suggestion in the evidence, or at least no submission made, that the future profitability of the company is likely to materially decline. That annual net profit correlates with the amounts the husband has previously drawn from the company by loan.  In 2015 he took $301,000 and in 2016 he took $278,000.

7. The wife’s proposal for the husband to further enlarge the loan account to fund her maintenance is not an attractive proposition because, if the money is drawn and spent, it will affect the parties’ liquidity. The larger the loan account, the less likely the company will be able to recover the loan from the husband, because he is reliant on only his wages to repay it. The company will have a greater asset in the form of a larger debt due to it, but that will be artificial if the loan is not fully recoverable from the husband. Moreover, the more the husband borrows, the more he will need to repay to keep the commerciality of the arrangement within the parameters of Division 7A of the Income Tax Assessment Act 1936 (Cth).

8. The wife alternatively contemplates that, in future, the husband can draw money from the company by dividend, but given he only owns 80 per cent of the shares he could only take 80 per cent of the net profit, which equates to about $240,000 per annum. Therefore, on the wife’s case, the husband could derive income annually of about $340,000, comprising his net wage ($120,000) and net dividends after his payment of extra tax on them ($220,000). 

9. The evidence demonstrates the husband’s annual expenses amount to about $318,000, comprising payments already made in respect of the wife and children ($98,000), a comparable amount of money to support himself as is used by the wife ($100,000), and loan repayments to the company (principal plus interest) so as to maintain compliance with Division 7A of the Income Tax Assessment Act ($120,000). 

10. Offsetting the expenses against income leaves a net surplus of about $22,000 per annum. The figures are undoubtedly broad estimates, but they were discussed with counsel in Court and were not the subject of mathematical dispute. 

11. The wife asserted the husband would not need to repay his company loan account on a “principal plus interest” basis, but that was contrary to the evidence adduced by the husband. He attributed to his accountant the advice that he needed to make loan repayments on a “principal plus interest” basis. I see no reason to reject that evidence, noting that it cannot be tested at this interlocutory stage, since it was not inherently incredible.

12. Because the figures are such broad estimates, I round the husband’s capacity to pay spousal maintenance up to $26,000 per annum and, therefore, intend to make an order that he pay periodic spousal maintenance of $500 a week, consistently with that conclusion. 

13. Of course, that payment will not meet the wife’s agreed need. Consequently, I intend to make a further order for the parties to instruct the wife’s solicitors to release from the funds they hold in trust the capital sum of $100,000 to each of the parties. The parties will be restrained from further distributions pending further order or agreement. The wife will be able to spend such money to supplement the spousal maintenance payments she receives from the husband to support herself. It should last her well over a year, even if she is unable to moderate her projected expenditure.

14. The money reposing in the solicitor’s trust account is owned legally by the husband, because the money is derived from the sale of a property owned solely by him. Without injunction, he would be entitled to the immediate release of all the funds. Aside from the $100,000 he will receive under these orders, an injunction is imposed precluding further withdrawals. The residue funds are needed to preserve the wife’s entitlement to a proper adjustment of the parties’ property, almost all of which presently rests in the sole control of the husband. The husband’s counsel did not want to be heard further when such an injunction was mooted in discourse between bench and bar. 

15. For those reasons, I make the following orders.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered 11 August 2016.

Associate:

Date:  30 August 2016